NZ swaps closed up 2-4 bps yesterday. Longer-dated NZGB yields closed up 8 bps.
Overnight, US 10-year yields experienced some volatility but overall were contained within a 2.03%-2.08% range.
NZ swaps pushed higher from the open yesterday following the previous night’s moves offshore. Swaps showed little response to the morning’s release of the QSBO, which suggested growth was running at least at trend pace, but inflationary pressures were fairly absent. NZ 2-year swap closed for the day at 2.70%. The 2-10s curve sits at 82 bps.
Late yesterday morning the NZDMO announced the syndicate for the issue of its new 2033 maturity NZGB. In previous similar events issuance has followed soon after such an announcement. We expect the same this time. The NZDMO aims to issue NZ$1-2b of the new bond, which will extend the duration of the current NZGB curve. The prospect of imminent supply of long-dated bonds helped prompt a sell-off at the long-end of the NZGB curve. The yield on NZGB27s closed up 8 bps, at 3.37%.
The RBA yesterday left its cash rate at 2%. No surprises there. The text of the Statement had very few changes, suggesting the Bank has not changed its view of the economy significantly. It would likely require a significant evolution of the outlook to see the RBA moving rates. This remains consistent with our NAB colleague’s view that rates will remain unchanged at 2% for an extended period, absent some major negative offshore development. The market continues to price around 40 bps of RBA cuts by late next year.
Overnight, US 10-year yields pushed up from early evening lows of 2.03% toward 2.08%. However, they slumped back to their earlier level after cautious comments from the IMF.
Today there are no domestic data releases scheduled. The further 10% gain in dairy prices shown at the GDT auction overnight should help underpin NZ short-dated swaps this morning.